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Wall Street closed lower on Wednesday, pulled down by bank stocks. A series of data on the manufacturing and job sectors released throughout the day and comments from a Fed official strongly suggested that the Fed will not ease off its pursuit of countering inflation through interest rate hikes. All three major stock indexes ended in the red.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 0.5% or 176.89 points to close at 32,813.23. Twenty-two components of the 30-stock index ended in the red, one remained unchanged, while seven ended in the green.
The tech-heavy Nasdaq Composite finished at 11,994.46, dipping 0.7% or 86.93 points.
The S&P 500 lost 0.8% or 30.92 points to close at 4,101.23. Ten out of 11 broad sectors of the benchmark index closed in the red. The Financials Select Sector SPDR (XLF), the Health Care Select Sector SPDR (XLV) and the Consumer Staples Select Sector SPDR (XLP) dropped 1.6%, 1.4% and 1.3%, respectively, while the Energy Select Sector SPDR (XLE) advanced 1.6%.
The fear-gauge CBOE Volatility Index (VIX) was down 1.9% to 25.69. A total of 11.45 billion shares were traded Wednesday, lower than the last 20-session average of 13.25 billion. Decliners outnumbered advancers on the NYSE by a 1.64-to-1 ratio. On Nasdaq, a 1.90-to-1 ratio favored the declining issues.
Fed Officials Continue to Suggest Further Tightening of Policy
Following Fed Governor Christopher Waller’s statement early in the week, San Francisco Fed President Mary Daly, an official otherwise not reputed to make hawkish comments, said on Wednesday that the Fed should get interest rates up as quickly as possible, including 50 basis point hikes at the central bank's next two meetings. Daly wants the interest rates to come up to 2.5%, a level which she believes neither pushes up or curbs economic growth, but tackles inflation. Fifty basis point hikes at each of the June and July meetings of the Fed are almost a foregone conclusion currently, and debate rages on the requirement for hikes for the rest of the year. Fed Chairman Jerome Powell recently said that the central bank would continue to raise rates until inflation comes down in a "clear and convincing" manner. These signals, coming in from various Fed officials throughout the week, erased last week’s investor confidence in the Fed that had helped the markets end in the green after weeks of losses. Fears that a hawkish Fed would be unable to attain a soft-landing of the economy dominated Wall Street on Wednesday.
Strong Economic Data Suggests Continued Inflation
The May ISM Manufacturing PMI rose to 56.1 from 55.4 in April, against a consensus decline to 54.3. This figure suggests expansion in the overall economy for the 24th month in a row after it contracted in April and May 2020. Demand for goods remains strong and spending is shifting back to services like travel and dining out, even as manufacturing remains constrained by supply chain issues.
As reported by the U.S, Census Bureau, construction spending for April 2022 was estimated at a seasonally adjusted annual rate of $1,744.8 billion, 0.2% above the revised March estimate of $1,740.6 billion. The March advance was revised to 0.3% from the previously reported 0.1%.
Job openings declined by 455,000 to 11.4 million on the last day of April. The March data was revised higher to show a record 11.9 million vacancies from the previously reported 11.5 million. The job openings rate slipped to 7% in April from 7.3% in March.
Labor market tightness was also suggested by the Fed's Beige Book report released on Wednesday, though there were some signs of easing off. Strong demand in the commodity and job market entails further inflationary pressure and resultant policy tightening by the Fed, and markets reacted accordingly.
Image: Bigstock
Stock Market News for June 2, 2022
Wall Street closed lower on Wednesday, pulled down by bank stocks. A series of data on the manufacturing and job sectors released throughout the day and comments from a Fed official strongly suggested that the Fed will not ease off its pursuit of countering inflation through interest rate hikes. All three major stock indexes ended in the red.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 0.5% or 176.89 points to close at 32,813.23. Twenty-two components of the 30-stock index ended in the red, one remained unchanged, while seven ended in the green.
The tech-heavy Nasdaq Composite finished at 11,994.46, dipping 0.7% or 86.93 points.
The S&P 500 lost 0.8% or 30.92 points to close at 4,101.23. Ten out of 11 broad sectors of the benchmark index closed in the red. The Financials Select Sector SPDR (XLF), the Health Care Select Sector SPDR (XLV) and the Consumer Staples Select Sector SPDR (XLP) dropped 1.6%, 1.4% and 1.3%, respectively, while the Energy Select Sector SPDR (XLE) advanced 1.6%.
The fear-gauge CBOE Volatility Index (VIX) was down 1.9% to 25.69. A total of 11.45 billion shares were traded Wednesday, lower than the last 20-session average of 13.25 billion. Decliners outnumbered advancers on the NYSE by a 1.64-to-1 ratio. On Nasdaq, a 1.90-to-1 ratio favored the declining issues.
Fed Officials Continue to Suggest Further Tightening of Policy
Following Fed Governor Christopher Waller’s statement early in the week, San Francisco Fed President Mary Daly, an official otherwise not reputed to make hawkish comments, said on Wednesday that the Fed should get interest rates up as quickly as possible, including 50 basis point hikes at the central bank's next two meetings. Daly wants the interest rates to come up to 2.5%, a level which she believes neither pushes up or curbs economic growth, but tackles inflation.
Fifty basis point hikes at each of the June and July meetings of the Fed are almost a foregone conclusion currently, and debate rages on the requirement for hikes for the rest of the year. Fed Chairman Jerome Powell recently said that the central bank would continue to raise rates until inflation comes down in a "clear and convincing" manner. These signals, coming in from various Fed officials throughout the week, erased last week’s investor confidence in the Fed that had helped the markets end in the green after weeks of losses. Fears that a hawkish Fed would be unable to attain a soft-landing of the economy dominated Wall Street on Wednesday.
Strong Economic Data Suggests Continued Inflation
The May ISM Manufacturing PMI rose to 56.1 from 55.4 in April, against a consensus decline to 54.3. This figure suggests expansion in the overall economy for the 24th month in a row after it contracted in April and May 2020. Demand for goods remains strong and spending is shifting back to services like travel and dining out, even as manufacturing remains constrained by supply chain issues.
As reported by the U.S, Census Bureau, construction spending for April 2022 was estimated at a seasonally adjusted annual rate of $1,744.8 billion, 0.2% above the revised March estimate of $1,740.6 billion. The March advance was revised to 0.3% from the previously reported 0.1%.
Job openings declined by 455,000 to 11.4 million on the last day of April. The March data was revised higher to show a record 11.9 million vacancies from the previously reported 11.5 million. The job openings rate slipped to 7% in April from 7.3% in March.
Labor market tightness was also suggested by the Fed's Beige Book report released on Wednesday, though there were some signs of easing off. Strong demand in the commodity and job market entails further inflationary pressure and resultant policy tightening by the Fed, and markets reacted accordingly.
Shares of The Goldman Sachs Group, Inc. (GS - Free Report) and JPMorgan Chase & Co. (JPM - Free Report) dipped 1.5% and 1.8%, respectively. JPMorgan Chase currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.